Governor blasts GOP for lack of progress on California state budget deficit

SACRAMENTO - Saying the state is "heading toward a financial Armageddon," Gov. Arnold Schwarzenegger attacked his fellow Republicans Wednesday over the lack of progress on the state budget deficit.

The longer lawmakers go without solving the crisis, the worse it gets, the governor said. Schwarzenegger said the size of California's budget deficit has grown to $14.8 billion for this fiscal year. And it could balloon to $40 billion over the next 18 months - $12 billion more than previous estimates.

"They've got to get going and they've got to start negotiating and take this seriously, rather than playing chicken," the governor said.

A clearly frustrated Schwarzenegger pleaded for legislative leaders to meet this week, calling the state Legislature's failure to act so far a "shameful performance."

Republicans could be making a subtle shift toward potentially supporting new taxes, something they have vehemently opposed. However, such GOP support would come at a major price for Democrats.

Assemblyman Anthony Adams, R-Claremont, who was recently named chief whip of the Republican Caucus, said he would keep taxes on the table if Democrats accept a variety of major reforms.

"I do not want new taxes, but we cannot let the state become insolvent," Adams said Wednesday night. "I am not saying I support taxes, I'm saying I am open to discussion."

Many of the proposed reforms will be hard, if not impossible, for Democrats to stomach.

The GOP will release its official proposal on Monday, said Adams and state Sen. Bob Huff, R-Glendora.

The governor declared a fiscal emergency last month and called a special session of the new Legislature to address the growing gap, after a previous special session failed to solve the problem. The deficit for the fiscal year that ends this June then was estimated at $11.2 billion.

"What is amazing about all of this is that the Legislature acts as if we have $30 billion of surplus," the governor said. "They met, they debated, they postured and they did nothing."

Schwarzenegger had proposed $4.7 billion in tax increases and $4.4 billion in program cuts, as well as an economic stimulus plan, as a starting point for negotiations back on Nov. 5. That's when he declared the first special session for the fiscal year.

Republicans have remained steadfastly against raising taxes, rejecting a Democratic proposal for $8.1 billion in cuts and $8.1 billion in tax increases.

"The fact remains Democrats are the only ones who have been serious about compromising to find a budget solution. We have stepped up to the plate and support both the deep cuts and new revenues it will take to help close the budget deficit," Assembly Speaker Karen Bass said in a statement.

"It is past time for Gov. Schwarzenegger to break the logjam created by his own party and produce Republican votes for a package of cuts and revenues."

The GOP proposal to be announced on Monday will be the first official pitch from the party since the govenor's emergency declaration.

The budget deficit numbers will keep getting worse until the economy starts recovering, Huff said. The Republican proposal, therefore, focuses on various initiatives to stimulate investment and economic activity in California, he said.

The party proposes various tax credits for businesses and relaxing environmental regulations, which Adams said impede rapid investment in infrastructure projects that could create construction jobs.

But Assemblyman Mike Eng, D-El Monte, said Democrats have already given in to Republican demands and have gotten nothing in return. Suggesting the vague possibility of discussing new taxes is not negotiating, he said.

"When you negotiate, you have to ask a little, give up a little," Eng said. "I cannot see where they have given up anything. It's not a very effective way of negotiating - being very specific with what you want us to give up... but famously vague with saying what you are willing to come to to the table with."

The state treasurer, controller, nonpartisan legislative analyst and the governor's finance director addressed a rare joint session of the state Legislature Monday to warn lawmakers about the dire consequences of doing nothing. State Controller John Chiang has said California could run out of operating cash by February and state Treasurer Bill Lockyer warned the state would stop financing $5 billion in infrastructure projects in two weeks.

The governor unveiled a large deficit clock counting the number of days - 35 as of Wednesday - that the Legislature has failed to act since he declared the first special session for the current the fiscal year. Schwarzenegger said the clock would be placed outside his Capitol office.

The clock tracks how much state taxpayers are losing as the stalemate drags on: more than $1 billion a month that amounts to $470 every second, $28,000 every minute, $1.7 million every hour, and $40 million every day.

Schwarzenegger said he is willing to work through Christmas if that's what it takes to reach a deal.

"There would be no better Christmas gift for the people of California than for us to solve this crisis," he said.